Aether Industries Rs 800 Crore IPO opens today: Issue Size, Price Band & More

Aether Industries Limited IPO
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Aether Industries Limited IPO opens for subscription on the 24th May. The company is looking to raise up to Rs 808.04 crore through the public issue. 

Aether Industries Limited IPO Details:

Aether Industries IPO Date: 24 May - 26 May 2022 

Aether Industries IPO Price band: Rs 610 - Rs 642

Aether Industries IPO Issue Size: Rs 808.04 crore (Fresh Issue of Equity shares aggregating up to Rs 627 crore and an Offer for sale of Rs 181.04 crore)

Reservation: QIB 50%, Retail 35%, NII 15%

Post Issue Implied Market Cap: Rs 7991.79 crore (on upper price band)

Minimum Investment: Rs 14,766

Bid lot: 23 shares, and in multiples of 23 shares

Aether Industries Limited IPO: Objects of the Issue

The net proceeds from the IPO will be utilized for the following purposes:

  • Prepayment or repayment of all or a portion of certain outstanding borrowings.
  • Funding capital expenditure requirements for the manufacturing facility.
  • Funding working capital requirements and general corporate purposes.

Aether Industries: About the company

  • Aether Industries was incorporated in 2013 and is a manufacturer of specialty chemicals
  • The company is the sole manufacturer in India of chemicals such as 4-(2-Methoxyethyl) Phenol (4MEP), 3-Methoxy-2-Methylbenzoyl Chloride (MMBC), Thiophene-2-Ethanol (T2E), Ortho Tolyl Benzo Nitrile (OTBN), N-Octyl-D-Glucamine, Delta-Valerolactone, and Bifenthrin Alcohol.
  • They are one of the fastest-growing specialty chemical companies in India, growing at a CAGR of nearly 49.5% between FY19 and FY21.
  • The company specializes in products based on an intricate marriage of complex chemistry and technology core competencies. 
  • Aether Industries has two manufacturing sites at Sachin in Surat, Gujarat. 
  • Aether Industries Limited's product portfolio comprises over 25 products that were sold to over 34 global companies in 18 countries and over 154 domestic companies. 
  • Strategic R&D investments have been critical to its success and a differentiating factor for them to attain leading market positions for certain products.

Industry Outlook

  • The Indian chemicals industry has increased its capital expenditure over the past decade to be well equipped to capture future opportunities.
  • According to the F&S Report, Rs 95 billion was spent in FY20 by the 30 leading chemical companies in India on capital expenditure, as compared to Rs 39 billion in FY10.
  • From CY 2020 to CY 2025, the global chemicals market is expected to grow at a CAGR of 6.2%, and the India Speciality chemical market at a CAGR of 11.2%, according to Frost & Sullivan. 

Listed Peers

The listed peers of Aether Industries include companies like Clean Science and Technology Limited, Navin Fluorine International Limited, Vinati Organics Limited, PI Industries, and Fine Organic Industries Limited. Below is the financial comparison:

  • In terms of revenue, PI Industries is the largest player followed by Navin Fluorine. Aether Industries is last on the list in terms of revenue.
  • The Earning Per Share (EPS) is highest for Navin Fluorine (52.03), followed by PI INdustries (49.92). Aether Industry has the lowest EPS among listed peers.
  • The industry P/E is on the higher side with a couple of them quoted P/E over 100. Aether Industries has a PE of 72.3, at-par with many listed peers.
  • The RoNW is highest for Aether Industries followed by Clean Science and Technology.

Financials

  • The company has reported revenue of Rs 203.28 crore, Rs 303.78 crore, and Rs 453.79 crore for FY19, FY20, and FY21, respectively. The revenue has grown at a CAGR of 49.38% during the last three financial years.
  • The net profit reported by the company during the same period is Rs 23.33 crore, Rs 39.96 crore, and Rs 71.12 crore, respectively. The profit has grown at 76% CAGR between FY19 and FY21.
  • The EBITDA for FY19, FY20, and FY21 reported by the company is Rs 47.5 crore, Rs 71.76 crore, and Rs 76.54 crore. The EBITDA margin for the same period is 23.61%, 23.78%, and 22.91%, respectively.
  • The company's expenditures (revenue and capital) for FY21, FY20, and FY19 on research and development were Rs 19.28 crore, Rs 12.09 crore, and Rs 5.3 crore, respectively, which represented 5.40%, 4.25%, 3.98%, and 2.60%, respectively, of total income. 
  • The ROCE for FY19, FY20, and FY21 is 25.16%, 26.07%, and 28.50%, respectively. The ROE for the same period is 60.54%, 51.04%, and 40.79%, respectively.
  • For the last three financial years, the company has posted an average EPS of Rs 5.51 and an average RoNW of 47.50%. 

USPs

Differentiated portfolio: The company is focused on producing advanced intermediates and specialty chemicals involving complex and differentiated chemistry and technology core competencies. Their products have applications across a wide spectrum of uses in the pharmaceutical, agrochemicals, material science, coatings, etc. They were the sole manufacturer in India of 4MEP, MMBC, T2E, OTBN, NODG, DVL, and Bifenthrin Alcohol (CY20).

Focus on R&D: Company's chemistry and technology core competencies and all of its products have been developed by an in-house R&D team, scaled up in Pilot Plant, and launched into production with in-house design and engineering. They have one of the largest pilot plants in the world with 106 reactors installed, for both batches as well as continuous reaction technology.

Long-standing relationships with customers: Their customers include over 160 multinational, global, regional, and local companies. As of March 31, 2022, the company's product portfolio was sold to 34 global customers in 18 countries and to 154 domestic customers. They enjoy relationships in excess of 5 years with 7 out of their top ten customers.

Synergistic Business Models: It has three business models: large-scale manufacturing of intermediates and speciality chemicals, CRAMS (contract research and manufacturing services), and contract / exclusive manufacturing. These business models benefit from and have synergies with each other.

Growth Potential

Leverage strong position in the speciality chemicals: The global chemical market is expected to grow at a CAGR of 6.2% and the Indian speciality chemical market at a CAGR of 11.2%. Aether has a leadership position in many speciality chemical product areas and is well-positioned to capitalize on the market opportunities.

Expand product portfolio: The company plans to expand its product portfolio in line with its existing new competencies and also by adding new competencies. In the next three years, the company plan to invest approximately Rs 12.5 crore towards R&D in the first year with an increasing trend of 30% to 35% in the next two years. 

Expand Manufacturing and Pilot Plant Capacities: To cater to the growing demand from their existing customers and to meet the requirements of new customers, Aether Industries is in the

process of expanding manufacturing capacities for existing products including 4MEP and BFA. It also plans to add manufacturing capacities for a new product line that they are in the process of developing and commercialising. 

Expand distribution network in the international market: It plans to expand globally to serve existing direct end-user customers as well as to secure new direct end-user customers and expand the reach of its products in new markets. 

Risks

Risk in the manufacturing process: Company's business is dependent and will continue to depend on its manufacturing facilities and are subject to certain risks in the manufacturing process. Any slowdown or shutdown in any of its manufacturing operations due to strikes, increased wage demands, etc would interfere with their operation and affect the business.

Use of hazardous substances: The manufacturing process involves the manufacturing, storage, and transportation of various hazardous substances such as phenol, hydrogen, ethylene oxide, isobutylene gas, etc. The business comes with operating risks associated with the handling of such hazardous materials. Any leakages and ruptures from containers, explosions, and the discharge or release of toxic or hazardous substances, may cause personal injury, property damage, and environmental contamination.

Significant revenue from major customers: The top 10 customers contributed approximately 55.76% and 56.23% of its total revenue for 9MFY22 and FY21, respectively and the top 20 customers contributed 72.93% and 73.50%, respectively. If one or more of such customers choose not to source their requirements from Aether or to terminate long-term contracts, it will affect the company's revenue.

  • Aether Industries IPO date: When does it open for subscription?
  • Aether Industries IPO issue size: How big is this IPO?
  • How to apply for Aether Industries IPO?
  • What is the lot size for the Aether Industries IPO?
  • When will the Aether Industries IPO allotment happen?
  • When is Aether Industries IPO going to get listed?
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